Taxes? The Last Frontier State actually gives residents money for living there, distributed from its Permanent Fund, an oil wealth savings account administered by the state. This year, every man, woman and child who has lived in Alaska for at least one year received a 2009 dividend of $1,305. There's no income tax, no state sales tax, and only 25 municipalities even levy a property tax. Some municipalities impose local sales taxes of up to 7%, however.

I would like to add that Alaska has many services for the elderly, retired, veterans and low income individuals.

In addition, Alaska also offers:

Heating Cost assistance:

Subsistence Hunting, Fishing and Trapping permits;

Low cost licenses for anyone over 60;

Low unemployment compared to the Lower 48;

Consistent values for your home investment;

Clean air, fresh water and a friendly attitude.

Who’s No. 2?

Best: No. 2, Wyoming

State income tax: None

State sales tax: 4% (localities can tack on an extra 1%)

Inheritance tax: No

Retirees don't pony up much in taxes in the Cowboy State. Thanks to the abundant revenues that Wyoming collects from oil and mineral companies, residents shoulder the lowest tax burden of any state except Alaska, according to the Tax Foundation. Prescription drugs and groceries are exempt from state sales taxes. For most property, only 9.5% of market value is subject to tax, so a home worth $100,000 is taxed on $9,500 of assessed value.

You can also find - The most (and least) tax-friendly places to retire

Where you live can make a lot of difference in how far your retirement dollars stretch, and the story goes way beyond which states have no income tax.